One of the more important documents that a business should have is its business plan. This living breathing document should be not only a guide to the operation of your business but also a valuable document in your ability to obtaining funding. Whether this funding is from a bank, or an external or internal investor, your business plan can be the secret weapon to getting your finance needs across the line.
When borrowing from a bank the three most common aspects that the bank will consider are:
- The security that they will hold for the loan (Including your equity levels)
- Your ability to service the interest and repayments of principle amount; and
- The specifics of your business. Including who the owners are, who their advisors are and how much planning (if any) has been done.
The third point covers not only the business activities and plans but also to what extent the business has considered its risks and how these are to be mitigated. Obviously this becomes more important as the dollar value of borrowings increases. Your business plan should address these risks and show a clear path for the business to grow and to provide value to the investors.
A strong business plan will typically include at least the following: details of the business and its mission and vision, analysis of the market in which it operates, strategies for growth, financial analysis (including cash flow projections and an assessment of the viability of the business), staff requirements and staff management plans, risk assessments, competitor analysis and importantly your exit strategy.
Whilst typically, a business plan should be done before starting or purchasing a business, it is a worthwhile exercise to undertake at any time and should be revisited at least annually. This will ensure you can make financing decisions very quickly and that you minimise the risks of things going wrong financially.
If you need help with writing/updating your business plan and or would like to know more about cash flow projections and the viability of your business, or proposed business, please contact our office.